If you find yourself in the situation of having declared bankruptcy, and now need a car loan, it can be very difficult. When you need a new vehicle, there are some steps that you can follow to increase your chances of approval and in getting a lower interest rate. Because your credit score is well beyond perfect, it is extremely important to note that you should purchase an inexpensive vehicle and make timely payments. You can then begin to quickly rebuild your credit history.
Find a Co-Signer
There are several things you can do to make the process of securing a car loan after bankruptcy much easier. One way of easing the approval process is by finding a co-signer. A co-signer is a person, usually a friend or family member, who will guarantee to the lender that you will make timely payments. Cosigners are individuals with a good credit history who sign the loan application with the primary borrower. A co-signer also accepts responsibility for the loan in case you default on the payment. In having a co-signer, the lender feels more comfortable that the money they lent you will be repaid.
Another way you can give yourself a better chance of getting approved is if you can show evidence of a steady income. Lenders vary in terms of requirements, but if you can prove that you have worked at the same company for a period of two or more years, it will significantly help in securing a loan after bankruptcy. The lender will likely feel comfortable in the fact that you should continue receiving a paycheck in the future.
A large down payment will also help in obtaining approval for a bankruptcy car loan. Your credit is not as important if you have a large down payment on the vehicle. This shows the dealer that you are a serious buyer and that you are not likely to default on your payments. A large down payment may also help keep your interest rate low and more manageable. The bigger the down payment, the better the loan terms and likelihood that you will get approved. Typically car buyers put down less than 10 percent, but with a bankruptcy you should aim for a 20 percent down payment. This makes the loan less risky for the lender so they are more likely to lend you the money.
In the case that you do not have a down payment or a co-signer, all is not lost. You may still be able to acquire a loan. Always check with your local banks or credit unions to see if they have any kind of programs set up for people with poor credit. Although this is rare, it is worth checking into.
Buy Here, Pay Here
Finally, dealerships known as ‘buy here, pay here’ lots will be the most likely to finance a person with a bankruptcy on their credit report. These dealerships, often advertised on radio and in print, usually make statements like “we finance anyone” or “come on down and we guarantee you will get in a car today!” Buy here, pay here dealerships not only sell you your car, but they also become your banker. It is important to remember that because the dealership is taking a risk on you, they will most likely require a high interest rate. For this reason, it is essential that you purchase a cheap car that you can afford. Keep your payments low, build up your credit, and pay off the car as soon as possible.
For more information in applying for auto loans through BlueSky Auto Finance click here.